To settle the SEC charges, Merrill Lynch agreed to pay a $6 million penalty. The SEC also charged its parent company, BAC North America Holding (BACNAH), with causing the violations. In a parallel action, Merrill Lynch agreed to pay an additional $6 million to settle charges brought by FINRA.
According to the SEC order, issued July 11, BACNAH assumed responsibility for creating and implementing Merrill Lynch’s SAR policies and procedures and for filing Merrill Lynch’s SARs. However, from January 2009 to November 2019, BACNAH used the $25,000 threshold applicable to national banks, rather than the $5,000 required threshold applicable to broker-dealers, for reporting suspicious transactions. As a result, BACNAH failed to file nearly 1,500 SARs for Merrill, according to the SEC and FINRA orders.
“Broker-dealers have a critical obligation to report suspicious activity in their accounts,” said Katharine Zoladz, Co-Acting Regional Director of the Los Angeles Regional Office. “Merrill Lynch and BACNAH did not file hundreds of Merrill Lynch SARs, because they failed to comply with one of the most basic requirements for a SAR program.”
The SEC found that Merrill Lynch violated the books and records provisions of Section 17(a) of the Securities Exchange Act and Rule 17a-8, and that BACNAH caused those violations.
Under the FINRA order, Merrill Lynch was fined $6 million for “failing to establish and implement policies, procedures, and internal controls reasonably designed to cause the reporting of suspicious transactions as required by the Bank Secrecy Act.”
“Law enforcement and regulators depend on FINRA member firms to properly report potential fraud and other suspicious activities,” said Christopher Kelly, acting head of FINRA’s Department of Enforcement. “It is, therefore, essential that member firms comply with their SAR filing obligations. Merrill Lynch failed in this basic responsibility.”
In settling these matters, Merrill Lynch consented to the entry of the SEC and FINRA’s findings without admitting or denying the findings. 
Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.